One of the most significant financial decisions that one can make in their lives is to file for bankruptcy. No matter how hard an individual try, there comes a time when there is no other option to save themselves from the financial hardships then filing for bankruptcy.
Even though bankruptcy bestows a chance upon an individual to start fresh without the burden of loans and debts, but it is the toughest decision, anyone can make in their lives. Giving up your life’s entire savings and assets for liquidation is not easy, and therefore, you need to take the decision after you have given it enough thought.
Before you file for bankruptcy, you need to consult a professional and research as much as you can. Here is the list of the most important things that you need to know before you make up your mind and opt for bankruptcy.
There are Different Types of Bankruptcy
When it comes to bankruptcy, there is more than one type that you can consider. If bankruptcy is the only option for you, it all comes down to choosing the right type of bankruptcy. The two types that you need to consider are Chapter 7 and Chapter 13 bankruptcy.
Chapter 7 revolves around liquidation of the assets. It is a way through which you can pay most of your debts. Under this type of bankruptcy, the Court sells all your non-exempt assets to settle the debts and loans. If you consult a professional attorney, you will get a chance to save some of your assets and even pay all your debts.
Chapter 13, on the other hand, is the reorganization of your debts. In some cases, chapter 13 bankruptcy is known as the reorganization bankruptcy. Under this type of bankruptcy, you have to design a repayment plan with the assistance of the Court and the attorney. To choose chapter 13, you need to have a regular monthly income because you will have to pay a certain amount every month. The repayment plan is for three to five years, depending upon the financial situation of an individual.
The Process Takes Time
It is important to understand that the process takes time. If you think all you have to do is file for bankruptcy and sign some papers. You need to have patience when you are filing for bankruptcy. When filing for Chapter 7 bankruptcy, you need to make up your mind that the minimum time that the case will take to settle in six months.
When filing for Chapter 13 bankruptcy, the settlement of the case might take more than six months. The entire process is long and very stressful, but it can help you come out of your financial blockage. If you have made up your mind about filing for bankruptcy, prepare your mind as the process will take a considerable amount of time.
Filing for Bankruptcy Does Not Come Cheap
An individual or business files for bankruptcy when they do not have enough capital to pay off their debts and loans. Instead of being an affordable procedure, filing for bankruptcy is much more expensive than you can imagine. The fact that it is an option that the people financially in trouble choose makes the entire process difficult to understand.
In addition to the substantial cost of filing for bankruptcy, you have to pay the court fee, attorney fee, and filing fee. The total cost of filing bankruptcy may cost you a considerable amount of dollars.
It Can Ruin Your Record
When you file for bankruptcy, make sure that it will show up on your financial record and it stays there for a very long time. Filing for bankruptcy does help you pay all your debts and loans, but it cannot just clean your credit history.
Chapter 13 bankruptcy stays on record for seven years, and Chapter 7 can stay on record for ten years. When you are filing for bankruptcy, know that your credit history will not be entirely clean.
Bankruptcy Does Not Waive Off the Student Loans
Planning to file for bankruptcy to get rid of the hefty amounts of student loans? Well, you need to understand that filing for bankruptcy does not waive off the student loans. It can make your student’s loans repayable by managing it efficiently, but you will have to pay the loan!
In some situations, filing for bankruptcy is the only way out, but in many cases, there are other options. It is something not many people will tell you. Therefore, before you make up your mind about filing for bankruptcy, you need to look at all available options. You can always try to renegotiate with the creditors and make some changes in the debt payment. It is not an easy task, but it is worth trying. Another option that can opt for is consolidation, which is to consolidate the high-interest debt into a debt which has a lower interest rate.
It is important to remember that you can always start fresh, and falling into despair will only make the situation worse. Try to consult a professional bankruptcy lawyer when you start thinking of choosing the path. The process is not easy but approaching the situation with complete knowledge is the right way!